Hutton Tied To Money-laundering Probe

PROVIDENCE, R.I. — Office procedures by a branch of the E.F. Hutton & Co. securities firm are under investigation by a federal grand jury in Providence, a company spokesman confirmed.

Sources quoted in Friday`s editions of the Providence Journal said the probe involves allegations of money laundering in accounts that may have belonged to organized crime members.

Hutton, which in 1985 pleaded guilty to 2,000 counts of mail and wire fraud in connection with a check-overdrafting scheme, disclosed the investigation in a filing with the Securities and Exchange Commission.

Steve Nelson, a Hutton spokesman in New York, said Thursday the matter

``is totally unrelated to the cash management case of 1985.``

The document filed with the SEC said the grand jury in Providence is looking into ``whether the company committed violations of certain reporting requirements relating to the deposit of cash and checks to accounts maintained in a branch office of the company in Providence between 1981 and 1984.``

The Providence Journal quoted unidentified sources as saying the probe involves at least one broker in the Providence office who handled several accounts that may have belonged to ``names associated with organized crime.`` The grand jury investigation, one source was quoted as saying, has been hampered by the death of a broker who handled most of the suspected transactions.

The newspaper quoted sources as saying the case involves breaking down substantial dollar transactions, which would have to be reported to the Internal Revenue Service, into smaller amounts to avoid the requirements of the Bank Secrecy Act.

A source was quoted by the newspaper as saying the IRS began investigating the local E.F. Hutton office in 1981 for violations of the cash transaction reporting rules.

Transactions of $10,000 or more processed by banks and brokerage houses must be reported to the IRS. A Hutton broker at the Providence branch apparently divided large transactions into smaller amounts of less than $10,000 each to circumvent the law, the newspaper said.